Municipal borrowing costs and state policies for distressed municipalities

• 成果类型: Article
• 署名作者: Gao, Pengjie; Lee, Chang; Murphy, Dermot
• 署名单位: University of Notre Dame; University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2018.10.009
• 发表日期: 2019
• 页码: 404-426
• 关键词: default risk; Government policy; municipal bonds; Creditor protections

摘要

Policies on financially distressed municipalities differ across US states, with some allowing unconditional access to Chapter 9 bankruptcy (Chapter 9 states) and others having proactive policies to assist distressed municipalities (Proactive states). These differences significantly affect borrowing costs. In Chapter 9 states, local municipal bond yields are higher, more cyclical, and more sensitive to default events than Proactive states. Default events have a contagion effect in Chapter 9 states, but not Proactive states. Lower local borrowing costs in Proactive states come at the expense of the state via higher intergovernmental revenue transfers in times of weak economic conditions. (C) 2018 Elsevier B.V. All rights reserved.